The privatisation programme was moving ahead with full tempo after processing 82 transactions to market in the last 3 years



Nov 25 - Dec 01, 2002

The Cabinet Committee on Privatization (CCOP) in its meeting last week in Islamabad finalised a calendar for privatization of seven important state enterprises up to April 2003. The CCOP meeting presided over by the Finance Minister left the actual implementation of the programme by the incoming elected government likely to be functioning by the end of this month.

The seven units identified included units of large capital base like Pakistan State Oil, Habib Bank Ltd., Pakistan Telecommunication Company, Oil & Gas Development Company, Karachi Electric Supply Corporation, National Investment Trust and Pak Arab Fertilizer. The prepatory work for the privatization of these big enterprises has been completed and these transactions are now ready for bidding. PSO, NITL, and HBL were at advanced stages and their bidding earlier scheduled for 3rd week of November has been advanced by 2 weeks.

Earlier, the board of privatization commission was informed by the privatization minister, Altaf Saleem, that out of total of Rs.36.2 billion earned during the period from October 1999 to October 2002, through privatisation proceeds an amount of Rs.9 billion had been transferred to the government and $125 million was available for transfer to the government. In addition, an amount of Rs.14 billion had been transferred to State Bank of Pakistan and over Rs.3 billion to other entities entitled to the proceeds under the law.

The board was told that the sale of shares of Pakistan Oilfields Ltd. through stock exchanges had fetched Rs.220 million and remaining 24.1 million shares of MCB had been sold through the same process for Rs.640 million.

The CCOP was informed that the privatisation programme was moving ahead with full tempo after processing 82 transactions to market in the last 3 years resulting in achieving proceeds of Rs.36.2 billion. This programme needed to be taken forward with full commitment so that major transactions could successfully be concluded in the period between November 2002 and April 2003 likely to fetch Rs.100 billion, the committee was told.

The CCOP appreciated the strenuous preparatory work that Privatization Commission had to undertake before an entity or a business concern can be offered for sale to the prospective investors. The process starts with the identification of the entity to be privatized. A Financial Advisor (FA) is then selected and appointed to submit the technical and financial proposals for making the entity saleable and propose a transaction structure for approval. FA's job includes removal of legal encumbrances and restructuring of the entity. The Financial Advisor for this purpose carries out due diligence in depth before submitting recommendations.

Enactment of a regulatory framework and sectoral reforms was done to ensure level playing field and competitive framework in the post privatization period are carried out. The next important step is valuation of property/ assets, which serves as the benchmark, or indication of the fair value. Interested parties are then called to pre-bid meetings where the issues they raise are clarified. Bidding is the last stage after which a legal contract is entered into with the successful bidder regarding payments, handing over of the assets.

The CCOP noted that the pipeline of privatization was almost empty when this government took over. The Minister for Privatization Altaf Saleem and his team had done commendable job in bringing all these important transactions to maturity going through all steps indicated above in a short period.

The CCOP approved the package for recovery of balance sale price for certain privatized enterprises. The Committee also approved sale of shares of Kohat Cement and DG Khan Cement companies through Stock Markets. CCOP gave go ahead for the privatization of ICP and its mutual funds.

After remaining stugglish for over a year of following the take over by Gen. Musharraf, the PC picked up its work in right earnest last years. It has gained a momentum, but September 11 event in the USA and consequent Afghan war again allowed down the process for many months. After absorbing this setback, the PC started its work with full speed and successfully carried out many transactions including that of United Bank Ltd. (UBL) during the last few months.

Addressing a meeting of Chamber of Commerce and Industry, the Minister of State for Privatization, Altaf M. Saleem said that state enterprises worth over Rs.100 billion are ready for privatization and the same are likely to be put into market in the period from November 2002 to March 2003. He said that during the tenure of present regime, state enterprises worth Rs.36.2 billion have been privatized. Out of this 50 per cent sale proceed came from domestic investors, while rest of them came from foreigners, including overseas Pakistanis. He said that the previous regime could make only two transactions during its tenure and that were worth Rs.2.45 billion. Nevertheless, present regime, when came into power refocused the programme and done preparatory work before any transactions, which was not in practice in the past. That was why there were about 8.35 litigation cases against the privatization of different entities done during past many regimes. But there was not even single litigation case against the sales conducted by present regime, he proudly claimed. Before privatization of certain entities, all the stakeholders were taken into confidence and they were convinced that there was no problem in privatizing the entities. Privatization ordinance was promulgated that also provided a clear-cut road map and put proper regulatory framework in place, he claimed.